Nigeria Backs Saudi Arabia on Possible Oil Production Cut
By Ikenna Omeje
The Nigerian government has backed Saudi Arabia, the de-facto leader of the the Organisation of Petroleum Exporting Countries (OPEC), on its idea that members may cut oil production output to stabilize the market.
Saudi Energy Minister, Prince Abdulaziz bin Salman, who floated the idea last week, noted that there was a disconnect between paper and physical oil markets, which does not reflect realities.
“Markets can’t reflect the realities of the physical fundamentals in a meaningful way and can give a false sense of security at times when spare capacity is severely limited and the risk of severe disruptions remains high,” Salman told Bloomberg in an interview, as reported by the Saudi Press Agency.
Nigeria Backs Saudi Arabia
Backing Saudi Arabia in a statement on Sunday, the Minister of State for Petroleum Resources, Chief Timipre Sylva, said that a stable oil is beneficial to consumers, producers and investors.
“A stable oil market benefits all – consumers, producers and investors alike. It is also a catalyst for global economic growth.
“As such, any measure required to ensure the stability of the oil market, whenever it is necessary, will always be comprehensively supported by Nigeria,” the minister said.
Republic of Congo Also backs saudi Arabia
Similarly, OPEC’s Rotating President and Republic of Congo Oil Minister Bruno Jean-Richard Itoua has also declared support for Saudi Arabia, saying that the proposal on possible oil production cut by the OPEC leader, was in line with his “views and objectives,” the Wall Street Journal reported.
Ahead of a September 5 meeting of OPEC+, which is the umbrella body of 13 OPEC members and 10 non-OPEC members led by Russia; Iraq, Algeria, Libya, Kazakhstan, Azerbaijan, Venezuela and Equatorial Guinea have all made similar pronouncements.
The possible oil production cut is coming just as OPEC+ is about to bring back fully all the 9.7 million barrels per day it cut off the market at the height of Covid-19 pandemic in May 2020, to rebalance the market.
Consequences
Following the comment by Saudi Energy Minister, oil prices have rallied above what it was two weeks ago. As of 9:20 am (Nigerian Time) on Monday, Brent crude, the global oil benchmark, was selling at $102.0, while West Texas Intermediate (WTI) was selling at $94.26. This is according to oil price chart of Oilprice.com.
- Oil has remained elevated since 2022. In March, prices soared to an all-time high of $147 after invasion of Ukraine by Russia, a war that disrupted oil production and supply. However, recessionary fears, rising inflation and weaker demand have since weighed on prices.
